Streetwise for Friday, June 15, 2018
Expose your flank, and they will be on you like a pack of hungry wolves. Weakness is detected in the same way sharks are drawn to blood in the ocean, and with similar results. A no-holds barred battle, ear-biting excepted…maybe…with spoils to the winners, while losers limp off into obscurity.
No, it’s not professional sports, it’s Wall Street. Here players of every variety and size are locked in mortal battle as each try to wrest the most dollars from an investment strategy or client base. Do not allow yourself to be caught up in the hubris of the Street.
At the same time, do not rivet your attention on the Dow Jones Industrial Average as if it was some sort of Holy Grail. It is not. Yet, there is no denying that the Dow tends to steal the show.
However, unless you happen to own all thirty stocks that make up the Dow, a poor strategy at best, you do not have a dog in that fight. You are merely a spectator looking at what are at best historical statistics. You need to concentrate your attention on buying a part of players who are on a winning team.
While you may be concerned at times over short-term market heights or volatility that is no reason to abandon starting or growing your portfolio. You need to invest, and specifically you need to invest in equities, regardless of what the market does. No investment vehicle can rival the track record of common stocks as a way of accumulating wealth.
Remember my mantra so often repeated…unless you are penniless and on your deathbed with no heirs, you need to always keep some portion, hopefully a large portion if not the entire amount of your financial assets in equities.
Unfortunately, there are always those who continually live in fear that somehow the stock market is out to ruin them. Such logic has never come to fruition in my lifetime nor do I expect it ever will.
Stock transactions are historical events, each being nothing more than an agreement between two individuals where one is willing to sell, while the other is willing to buy. Trying to predict how those two individuals are valuing the investment in question is not just an exercise in frustration, it is one of complete futility. Extrapolating from there, it is impossible to predict what thousands of people may or may not do?
However, what you can analyze is the economic environment that the financial markets operate in. And here I must take a moment to give credit where credit is due.
My father, whose successful Wall Street career spanned more years than I have been alive, always reminded me that if you want to know what is likely to happen on Wall Street tomorrow, look at what is happening in the economy today. And what are you now seeing? Rising interest rates, rising inflation, tariffs, and soon a feeding frenzy among media firms…and a healthy economy.
Does investing in stocks entail risk? Of course, it does. Change is inevitable. Problems are inevitable. Even the largest and most successful corporate monoliths are vulnerable to adversity. And unless you have access to inside information, it is impossible to predict the course of a stock in the short term.
Using inside information removes the uncertainty, but also means trading pin stripes for that less tailored look in stripes. However, risk can be controlled and contained through diligent research.
What about market volatility and the question of whether a major correction is coming? Could it be better to wait and invest later? Wrong. There is no good time or bad time to invest. As a shareholder, you are tying yourself to the fortunes of a company, not to the fluctuations of the overall market.
Worrying about market activity or index levels is senselessness. It is normal for the investment world to overreact, sometimes dramatically so. Any time the mood on the Street is negative, it simply means that you can go shopping and spend less than you might otherwise.
What companies continue to be potentially profitable in today’s environment? Simple answer…large cap blue chips with an uninterrupted series of dividend increases over ten or more years.
Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to www.RuddInternational.com.